Think twice before cutting - you might lose an account

Five years ago, if someone had suggested to the US Government that the most effective and economical thing they could do in the Middle East would be to spend one trillion dollars to improve relationships with the West, it is fairly certain it would have laughed at the idea.

Sue Unerman
Sue Unerman

However, according to a book published last week, the cost of the action they did eventually take was in excess of three trillion dollars, which would have made one trillion seem a bargain.

Even if we only look at the economic costs of war - the real costs in terms of tragic loss of human life are obviously far greater - it is striking how monumentally the forecasters underestimated the situation.

According to authors Stiglitz and Bilmes in The Three Trillion Dollar War, the initial official estimates of the cost were in the region of only £50bn.

Aside from the politics and the personal tragedy of war, there are a couple of points to take from this analysis that apply to our world.

Firstly, cost forecasts seem to be a fairytale much of the time. News stories - from the cost of building the Dome in London, to the cost of gearing up for the Olympics in 2012 - frequently show work coming in far over budget.

There seems to be very little feedback when the forecast of costs or delivery on a project is not met, and is not even in the right ballpark. Anyone who is involved with IT systems and development on a widespread scale will be familiar with this. Secondly, with every economy you make in the short-term, you need to consider the long-term consequences.

For instance, each time you reduce your recruitment replacement budget because you need to make a saving, you are taking a chance on one of your accounts.

You should be considering whether the short-term economy will actually cost you the account, or the cost of repitching for it.

And we can all think of media owners who under-invested in the future of their brands and are now suffering in the digital world.

As we look ahead to a year where it is likely that belts will tighten, it is crucial that we choose the right economies and that we don't make cuts that will end up costing us 10 times the saving in the long run.

- Sue Unerman is chief strategy officer at MediaCom
sue.unerman@haymarket.com

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